US Considers Easing Sanctions on Shadow Fleet Vessels to Cut Freight Rates
The Trump administration is considering easing sanctions on so-called shadow fleet vessels that have transported oil and petroleum products from countries including Russia, Iran, and Venezuela, in an effort to reduce record-high global freight rates. A US official said the discussions are happening days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel, a move met with criticism from Ukrainian President Volodymyr Zelenskiy, European countries, and some of Trump’s fellow Republicans in the US Senate.
The new talks center on the United States potentially allowing “legal oil” to flow on previously sanctioned vessels, the US official said. That means crude or petroleum products not sanctioned by Washington rather than Russian and Iranian oil, which are under punitive measures. The goal is to get more refined products and crude out of the Gulf, the official said.
Companies Would Need to Apply for Sanctions Relief
Companies seeking to use the sanctioned vessels would have to apply to the US Treasury Department to use the vessels, the official said. This move would not help Russia to move oil or oil products, according to the Department of Energy. The Treasury Department referred questions to the Department of Energy.
Freight Rates Soar to Record Highs
Tanker freight rates have soared to record highs as the wars in Iran and Ukraine have stoked inflation and put US crude oil out of reach for Asian refiners, pushing them to seek alternatives from the Middle East and Latin America. The Trump administration’s consideration of easing sanctions on shadow fleet vessels is an effort to reduce these record-high global freight rates.
Industry Sources Say EU and UK Rules Would Still Bind Ship Insurers
Industry sources say that even if the US eases sanctions on the shadow fleet, European Union (EU) and United Kingdom (UK) rules would still bind ship insurers. This means that any movement of oil or petroleum products via these vessels would be subject to EU and UK regulations.
Energy Aspects Weighs in on Sanctions Relief
Energy Aspects, a research group, said in a note to clients that easing the sanctions on the shadow fleet would not greatly impact freight rates but could allow more movement of oil in the Middle East. Lifting the sanctions on the tankers that are mostly old and not well maintained is “unlikely to add meaningful mainstream fleet capacity overnight, especially as most tankers sanctioned over Russian or Venezuelan links have been actively trading over the past three months,” it said in the note.
Context for Sanctions Relief
The Trump administration’s consideration of easing sanctions on shadow fleet vessels comes days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel. This move was met with criticism from Ukrainian President Volodymyr Zelenskiy, European countries, and some of Trump’s fellow Republicans in the US Senate. The goal is to get more refined products and crude out of the Gulf, according to a US official.
Original Article: US considers easing sanctions on shadow fleet vessels to cut freight rates, official says | Reuters — Reuters